JCPenney and Martha Join Forces

NEW YORK - The recently announced marriage between Martha Stewart and JCPenney is a pact through which both parties seek to revivify their clout in the home sphere. Home, once JCPenney's ace department, has been one of its worst performing businesses this year, executive chairman Mike Ullman disclosed during the company's quarterly analyst call last month. For Martha Stewart Living Omnimedia, the glory days lay farther back - 2002, when Kmart's exclusive Martha Stewart Everyday collection generated $1.5 billion in retail sales and was a huge contributor to MSLO's nearly $49 million in merchandising revenue that year. The Kmart relationship ended in 2007 and began winding down before that. MSLO has launched 20 merchandising partnerships across multiple product categories for Martha Stewart and Emeril brands to replace that business, and its executives this past spring predicted 2011 would be the year when Martha/Emeril products collectively broke the $1 billion barrier in retail sales. The new deal with JCPenney suggests Macy's was not seen by MSLO as contributing enough to the effort. A provision in the agreement that prohibits several categories of Martha Stewart home products from being licensed and sold elsewhere raises the question of how heavily the retailer plans to rely on the brand to enliven its home business. In addition to paying Omnimedia a commission on products sold in Penney's Martha Stewart shops and online store, the retailer has committed to an annual marketing spend for Martha products as well as sales commissions and an annual design fee. Altogether, Penney has agreed to a minimum of $172.4 million in payments to Omnimedia and marketing promotions over the course of the agreement, which runs through Jan. 28, 2023, according to an MSLO filing with the SEC. By February 2013, JCPenney has agreed to build Martha Stewart stores in about 600 JCPenney stores according to Omnimedia's specifications, the filing reported. The stores will be staffed by trained salespeople. Together, JCP and MSLO will develop an ecommerce site for the brand. The alliance is expected to generate $200 million in revenue for MSLO, according to a joint release announcing the partnership. JCPenney is taking a 16.6% stake in Omnimedia for $38.5 million and appointing two recently hired JCP execs to Omnimedia's board of directors: Michael Kramer, chief operating officer; and Daniel Walker, chief talent officer.